US market shocks: Should you always “buy the dip”?

16 April 2025

No doubt, you will be aware by now that in 2025, US stock markets have experienced some turmoil.

This volatility has largely coincided with Donald Trump’s inauguration into the White House in January. As far as elections and inaugurations go, market volatility is relatively normal – investors dislike uncertainty, and any new president coming into office brings with them a degree of unpredictability.

But this year, the president’s stringent tariff policies have had an even bigger impact than usual, with the BBC reporting that in early April, the S&P 500 experienced its “sharpest swings” since the Covid-19 pandemic began in 2020.

While some investors are prone to panic-selling when markets experience a downturn – something that is very likely to harm your portfolio’s long-term growth – others insist you should “buy the dip”.

Simply put, “buying the dip” means taking advantage of falling share prices by buying up units while they’re low. In fact, it’s clear that UK investors have done just that, with IFA Magazine reporting that they added £1.38 billion to the equity market in March 2025 despite global downswings.

So, should you be buying the dip? Keep reading to learn our view.

In theory, buying the dip is a great strategy

On paper, it makes sense to purchase more shares when prices are low.

Let’s imagine that a certain share cost £100 at the start of the year.

Due to market turbulence caused by tariff policies and global trade issues, the price now stands at £90. Purchasing five shares at £90 would cost £450, whereas at their original price, these units would have cost you £500.

If prices climb again after your purchase, let’s say to £110, your shares are now worth £550. Purchasing them at the lower price of £90 would mean you make double the gain in this instance – £100 rather than £50.

So, it’s clear why so many investors swear by the method of buying the dip. However, there are several risks and considerations to draw on before you can make an informed decision about investing your wealth.

Diversification and time in the market still matter more than “clever investing”

While you may see market dips as an opportunity to invest while prices are low, remember that the core principles of your investing strategy must apply over all else. This is because more than 100 years of market data shows us:

• Time in the market is a more reliable strategy than timing the market. Nutmeg analysed 50 years of market data and concluded that the longer you remain invested, the more likely it is that your wealth will generate a positive return. Whereas, timing the market – picking out “good moments” to invest rather than passively adding wealth to your portfolio at regular intervals – is not as reliable.
• A diversified portfolio helps to mitigate risk. Seeing as market downturns in the US are the topic of news right now, you could be tempted to buy up US-based shares to reap the rewards if markets swing upwards in future. But doing so could weight your portfolio too heavily in the US region, meaning that it is vulnerable to US-based market fluctuations in future. So, if you plan to invest soon, make sure to keep diversification in mind.
• Overexcitement could be detrimental. As stated by perhaps the most successful investor of all time, Warren Buffett: “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” In other words, even if you are considering buying the dip, your investments should always form part of a long-term plan and not be a product of a short-term whim.
• Sticking to your existing investment strategy might help. If you invest on a monthly basis, we would not usually advise that you stop doing so when markets are down. In fact, consistent investing may be the key to your long-term financial freedom, so don’t let volatility put you off. That said, over-investing when markets are down could be detrimental too. So, sticking to your consistent, long-term investment strategy may be the best course of action.

While there is nothing wrong with making hay while the sun shines, considering the above points before buying the dip could be highly constructive.

Bespoke investment advice may offer peace of mind when markets are volatile

Even though you may know, logically, that markets usually recover, it can still be difficult to witness the value of your portfolio fall substantially. When circumstances outside of our control threaten our financial stability, it’s natural to feel worried – we’re only human.

That’s why working closely with a financial planner could be so helpful. We’ll keep in touch with you to let you know how your investments are faring and what, if anything, you could be doing to protect your wealth during turbulent times.

What’s more, our ongoing advice may mean you can make informed decisions when you do decide to liquidate a portion of your portfolio, perhaps in retirement, or to give a lifetime gift to your child. This kind of decision is best taken with a professional on your side, who can advise on your tax position and other crucial elements.

Get in touch

To learn more about our investment management service, or to discuss financial planning in general, email info@depledgeswm.com or call 0161 8080200.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate tax planning.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.